From Services to Software: How Kintsugi Disrupted Sales Tax Compliance by Building What Competitors Wouldn’t

From Services to Software: How Kintsugi Disrupted Sales Tax Compliance by Building What Competitors Wouldn’t

Every founder in a service-adjacent space faces the same fork in the road: do we scale with people or with code? One path offers faster revenue and lower upfront costs. The other requires massive R&D investment with no guarantee of payoff. Most choose the easier path. Kintsugi chose differently—and it became their unfair advantage.

In a recent episode of Category Visionaries, Pujun Bhatnagar, CEO and Co-Founder of Kintsugi, a sales tax automation platform that’s raised over $8 million, revealed the strategic bet that separated his company from every competitor in the space: while others built agencies, he built software. The decision wasn’t just philosophical—it was tactical, expensive, and ultimately what enabled the company to double revenue month-over-month.

The Agency Trap in B2B Software

When Pujun and his co-founders conducted hundreds of customer interviews, they discovered something crucial about the sales tax compliance market: nobody was actually building software.

“All the players in the market, Avalara, it was a big company, but not necessarily a good company,” Pujun explains. The 2018 regulatory changes from South Dakota v. Wayfair had caught incumbents off guard. “They were kind of caught with their pants down with the changing regulations, because if you have a sales tax engine that is powered by engineering, you can change the code and you can very quickly iterate to catch up with the different rules that are coming out.”

But here’s where it gets interesting. “Some of the other competition in the space, they try to build it like an agency, where they programmatically pull in the data and then they ship the data out to India, Vietnam, Philippines,” Pujun reveals. “And while there’s nothing wrong with that, it’s very much a services kind of business.”

The implications were massive. Agency models mean linear scaling—more customers requires more people. Onboarding is slow, margins are capped, and product velocity is constrained by human bandwidth. Most importantly, it meant every competitor was vulnerable to anyone willing to do the hard engineering work.

The Contrarian Bet

Kintsugi’s founding team made a decision that seemed crazy on paper: they would spend the majority of their resources on R&D in a space where competitors were spending on headcount.

“We spend, I think, 65% to 70% in R and D,” Pujun states. “Meanwhile, other companies run like agencies.”

That’s not a subtle difference—it’s a fundamentally different business model. While competitors hired account managers, customer service reps, and offshore processing teams, Kintsugi hired engineers. While competitors built Gantt charts for manual workflows, Kintsugi built AI-powered automation. While competitors measured success in customer-to-employee ratios, Kintsugi measured success in features shipped per sprint.

The R&D investment focused on building what Pujun calls “a sales tax engine that is empowered by AI.” The goal? Collapse weeks of manual work into minutes of automated processing. But achieving that required solving genuinely hard technical problems—integrating with dozens of ERP platforms, computing accurate tax rates across 48 jurisdictions with constantly changing rules, and making it all work without human intervention.

The Compound Effects of Software Leverage

The R&D investment didn’t just make Kintsugi faster—it changed what was possible in the category entirely.

First, onboarding speed became a weapon. “We decided to basically flip the script and flip the table on the problem space and say, we are going to build a sales tax engine that is empowered by AI, where with three clicks and three minutes, we’ll be able to show your sales tax liability and exposure versus our other competitors in the space,” Pujun explains. “They take two to three weeks to just onboard a customer.”

Three minutes versus three weeks. That’s not incremental improvement—it’s a different category of product experience. “We are the only software in the space which actually has a get started button on the website and where people can actually, seven clicks or three minutes, they can get onboarded and see their sales tax liability within ten minutes without talking to a sales personnel,” he notes.

Second, it enabled product-led growth in a traditionally sales-led category. Because the software could provide value instantly and autonomously, Kintsugi could let customers self-serve. No sales calls required. No onboarding specialists. No manual data entry. Just sign up, connect your ERP, and see your liability.

Third—and this is where software leverage truly compounds—it created massive margin advantages that funded even more R&D. Service businesses are trapped in a cycle: revenue scales linearly with headcount, which constrains how much you can invest in product, which keeps you dependent on headcount. Software breaks that cycle. Every dollar of revenue that doesn’t go to servicing customers can go back into engineering.

Building Features Competitors Can’t Match

The R&D investment wasn’t just about automation—it was about building trust mechanisms that agencies couldn’t replicate.

“We have made heavy investments in R and D to be able to build these features where if somebody wants to audit our reports, they are able to programmatically do that,” Pujun shares. This matters more than it seems. In compliance software, auditability isn’t a nice-to-have—it’s table stakes for enterprise adoption.

But here’s what’s brilliant: building programmatic audit trails is an engineering problem, not a services problem. An agency can’t easily give you CSV exports of every transaction, jurisdiction-level breakdowns, and real-time visibility into where your money went. Those features require actual software architecture, database design, and API integrations. They require the kind of R&D investment that Kintsugi prioritized from day one.

The transparency extends to financial operations too. “While other companies withdraw money from your bank account three weeks prior to making your sales tax payments, we believe in transparency through and through,” Pujun explains. “We show each and every transaction on a jurisdiction level how much we paid to each jurisdiction and it comes out of their direct bank account. So we do not sit on that pile of cash.”

Again, this is a software problem. Orchestrating real-time payments across 48 jurisdictions, providing transaction-level transparency, and ensuring compliance—that requires engineering infrastructure, not more account managers.

The Growth Payoff

The question every founder asks: was the R&D investment worth it? For Kintsugi, the results speak for themselves.

“Ever since we were publicly available, we have been doubling in revenue month over month,” Pujun reveals. That growth rate—100% month-over-month—is only possible with software leverage. An agency model simply can’t scale that fast without proportionally scaling headcount, which kills margins and introduces operational complexity.

The company went from three people to 47 in ten months and “quadrupled in revenue ever since we raised our Series A.” More telling: they recently secured additional funding “at two x the valuation of what we raised our Series A at.” Investors bet on software economics, not services economics.

The Decision Framework for Founders

Kintsugi’s journey offers a clear framework for founders facing the services-vs-software decision:

If your competitors are building agencies, you have an opening to build software. If the work can be automated, the first company to automate it wins. If you have the technical chops to solve the hard engineering problems, the upfront R&D investment creates a moat that services companies can’t cross.

But—and this matters—you need to actually solve the hard problems. Pujun spent two years “doing sales tax by hand for ten different companies just so that I could understand really the ins and outs of what needed to be built.” That deep understanding let them build software that actually worked, not a thin veneer over manual processes.

The 65-70% R&D allocation isn’t a magic number—it’s a signal of commitment. It says: we’re building a software company, not a services company that happens to have an app. That distinction determines everything from hiring strategy to pricing model to exit potential.

For founders in service-adjacent spaces—whether it’s accounting, legal, recruiting, or any domain where incumbents use manual processes—Kintsugi’s playbook is clear: invest heavily in R&D, build actual software that eliminates human labor, and use the margin advantages to compound your lead. The easy path is to hire people. The defensible path is to write code.